The first step to getting your finances under control is to know where your money is going. But that isn't always obvious. Even if you have a good handle on your monthly bills, you may be surprised by how much money you spend on daily activities—like lunch and transportation—when you add up your out-of-pocket costs.
It's easy to track your spending if you focus on a short timeframe. When you see all of your expenses laid out, you may be able to identify some simple changes that could make a big difference in your financial situation—helping you stretch your paycheck or build your savings.
All you have to do is take a few simple steps:
1. List your regular monthly bills. Include your mortgage or rent, car loan, utilities, phone, Internet service, cable TV, credit-card bills, insurance premiums and child-care expenses.
2. Track your out-of-pocket spending for a week. Keep a small notebook with you to track all the money you spend for a week on groceries, gas, meals, clothes, entertainment, personal items, and even sodas and snacks. If you find it easier, collect the receipts during the day and add them to the list in the evening. Remember to track everything regardless of how you pay for it.
3. Review the numbers. Now that you can see how you've spent your money, look for ways to save. Some strategies may be simple like cutting back on meals out or using in-network ATMs to avoid fees. You may also want to make bigger changes that can save more money, such as cutting back on your cell phone package or dropping cable TV.
4. Take stock of big-ticket expenses for the past year. It helps to review special expenses such as home improvements, car repairs, travel, education, furniture and electronics. These bills don't crop up every month but can make a big difference in your finances and can land you in debt if you aren't prepared. Looking at these irregular expenses will help you plan better for emergencies and other unexpected bills.
5. Create a plan to use your money better. Review all of your expenses for ways to cut back, then decide what to do with the extra money. Set specific goals, such as building an emergency fund, paying off your credit-card bills, or increasing your retirement savings.
For more information and tools to manage your money with confidence, go to SaveAndInvest.org.
Gerri Walsh is Senior Vice President of Investor Education at the Financial Industry Regulatory Authority (FINRA).
FINRA is the largest independent regulator for all securities firms doing business in the United States. Our chief role is to protect investors by maintaining the fairness of the U.S. capital markets. FINRA does not endorse, sponsor, or guarantee, nor is it sponsored by, any advertisers on this site, and any dealings with those advertisers are solely between you and the advertisers.
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